Wednesday, October 17, 2012

Pittsburgh has been "ordered" by the ICA to reopen talks with its nonprofits to receive higher payments in lieu of taxes -- with a June 30th deadline to "report back".

The city has been communicating with its nonprofits on that subject for the past six years.

At present, we are receiving less money from these frequently profitable large institutions than we did six years ago.

It is hard to fathom what is expected to change this time.

In surveying the past six years of fruitless talks, two fateful moments seem to stand out:

1. The sum gathered from the closed-book Pittsburgh Public Service Fund roughly halved following UPMC's announcement to become the major donor to the Pittsburgh Promise -- indeed the medical giant briefly revealed an intention to quit PILOTs altogether in exchange. This was reversed in response to some awful publicity involving provisional tax credits asked for in exchange for Promise donations, but seems to have been un-reversed the following year.

2. After three years taking a self-described "cooperative" approach to negotiations, the Ravenstahl administration attempted to get tougher -- and chose the method of threatening to levy a tuition tax on university students. The tuition tax was also noteworthy for
taking universities to task while holding other major nonprofits
harmless, unlike some other options: a tax on hospital bills or beds, hikes in discounted medical water rates, or a fee on all-day parking. The tuition tax failed both to pass, or to motivate a better deal -- indeed it seemed to poison the water for further productive talks.

Please add your own comments beneath the Roxette video if you know of anything else which belongs in the narrative after reviewing and exploring these news excerpts.

Act I: Talks and confidence

It [the budget] counts on $17.7 million from a yet-to-be-built slots casino next
year, $10 million from the state each year, and $5.7 million annually
from nonprofit groups starting in 2008 -- none of which is guaranteed,
he said. (Oct. 18, 2006)

Ms. McNees said the revenue predications were based on state estimates and that the authority is in talks with nonprofit groups. (Oct. 21, 2006)

"It's my belief that we will be able to successfully get those revenues... from the nonprofit community," he said. "They've been
great partners in the past." (Nov. 14, 2006)

Mr. Peduto said he thinks the red ink will flow by 2008. He said the
long-term plan includes "phantom revenues" including overestimates of
payments by nonprofit groups, deed transfer and parking taxes, and state
aid. (Dec. 19, 2006)

Included in the revenue estimate is $4.3 million from nonprofit
organizations. The mayor said he has received verbal pledges in that
amount and is seeking binding commitments. (Sept. 21, 2007)

"At this point [pledges from nonprofit groups] are verbal and we're
in the process of establishing agreements and commitments," Mr.
Ravenstahl said. There's no promise by the groups "that I'm aware
of, because we've not met to speak about it," said the Rev. Ron Lengwin,
spokesman for the Pittsburgh Public Service Fund, a group of some 100
hospitals, educational institutions, foundations and arts organizations. (Sept. 22, 2007)

That begins to erase a big question mark from Mayor Luke Ravenstahl's
fiscal plan, which counts on $4.3 million in contributions from the
organizations next year and $4.1 million annually after that. Still
uncertain, though, is how much they'll end up paying. (Oct. 2, 2007)

Mr. Ravenstahl said he is confident that city nonprofits will
voluntarily pay up to $4.2 million in each of the next three years to
help the city's bottom line... (Oct. 26, 2007)

Mr. Ferlo said that if the ICA is still warranted, it should go to
the state with recommended changes in laws governing pension aid and
contributions from tax-exempt groups to cities. Mr. Pippy said he
will hold hearings on municipal contributions by nonprofit groups, and
he believes there will be serious discussion in Harrisburg on pension
aid. (Nov. 8, 2007)

The University of Pittsburgh Medical Center's pledge of $100 million
to fund college tuitions would supplant the healthcare giant's $1.5
million-a-year contributions to city of Pittsburgh coffers, its top
lawyer said today. That could mean other nonprofit entities, on
whom the city relies for $4.2 million a year, or 1 percent of its
budget, could choose to contribute to the Pittsburgh Promise and not the
city, too. (Dec. 18, 2007; see also Dec. 19)

City Chief of Staff Yarone Zober said Tuesday that the city is talking with tax-exempt groups about ongoing contributions. (Dec. 24, 2007)

In another bit of good news, UPMC also said it would still contribute
$1.5 million next year to the Pittsburgh Public Service Fund, a
3-year-old voluntary fund through which nonprofits have helped the city
balance its budget. (Dec. 29, 2007)

The Pittsburgh Public Service Fund, which assembled contributions from
some 100 organizations during the city's fiscal crisis, made its last
agreed-upon payment Feb. 21, bringing its total contribution to $13.98
million [over 3 yrs = $4.7 million per yr for 2005-2007]. The Rev. Ron Lengwin, spokesman for the Catholic Diocese of
Pittsburgh and for the fund, said the pledge was for $13.57 million, so
the fund exceeded expectations by $411,000...

Father Lengwin could not predict how much the fund would give to the
city over a subsequent three years, saying that depends on member
groups' finances. The city's long-term plan counts on $4.2 million a
year in contributions from tax-exempt entities. One complicating
factor is the role of the University of Pittsburgh Medical Center, which
has said it will contribute to the city for one more year but is
shifting its focus to the Pittsburgh Promise of college aid to graduates
of Pittsburgh Public Schools. (Mar. 1, 2008)

He said the administration is entering into negotiations with the
Pittsburgh Public Service Fund, a consortium of nonprofit groups, to
reach a voluntary donation agreement to replace one that ended last
year. (May 2, 2008)

A consortium of tax-exempt groups, including the universities,
hospital groups and nonprofit insurers, paid the city $14 million from
2005 through 2007, and offered $5.5 million for 2008 through 2010.
Council hasn't acted to accept the current offer.

Mr. Peduto and
Mr. Lamb said they've had conversations with leaders of large tax-exempt
institutions, including universities, who may be willing to make
further voluntary contributions. The Pittsburgh Council on Higher
Education announced in a news release that the colleges and universities
would "discuss our continuing activities in support of the entire
Pittsburgh community."

But Mr. Ravenstahl said that without the
"threat" of a tuition tax, they'll feel that $5.5 million over three
years is enough. "There's nothing that compels them to do anything more,
so they're able to get away with that." (Nov. 18, 2009)

Pittsburgh's universities told Mayor Luke Ravenstahl yesterday they
won't agree to his call for them to contribute $5 million to city
coffers to avoid a tax on tuition paid by students. (Dec. 12, 2009)

"One does not negotiate with an ax hanging over your head," said Chatham
University President Esther Barazzone, while joining her peers in
calling for "a big-tent coalition to help to lead the city to a
different future." (Dec. 15, 2009)

On Tuesday night, Councilwomen Theresa Smith and Tonya Payne got the
sense that their efforts at diplomacy between the city and university
leaders might bear fruit. (Dec. 17, 2009)

University officials are complaining behind the scenes about Mayor
Ravenstahl's "bullying" on the tax, which includes his promise Dec. 10
that he would not pull the proposal without a commitment of at least $5
million annually from the schools. (Dec. 20, 2009)

An as-yet-undefined group called the New Pittsburgh Collaborative "will
sit down in the early part of 2010 and come up with a strategy, and a
goal, if you will, on what it is we will ask Harrisburg for," Mr.
Ravenstahl said at a news conference in his office...

"We're not pledging a contribution in order to get rid of the tax," said
CMU President Jared Cohon. "We are prepared to pledge a contribution as
the tax is gotten rid of..."

Mr. Ravenstahl said that UPMC is not "out of the equation," but he has
considered excusing them in light of their $10 million annual pledge to
the Pittsburgh Promise of college aid to public school graduates. (Dec. 22, 2009)

"There has been no 'agreement' established between the city and the
other member institutions," she said. "Even the statement made today by
the University of Pittsburgh and Carnegie Mellon University identified
'handshake agreements,' not finalized until the tax was actually removed
from consideration." (Dec. 22, 2009)

The
five-year plan included $20 million in revenue from big nonprofits,
such as the city's universities. Mr. Ravenstahl's office said it
believed the contributions had been solicited by Councilman Bill Peduto.

However, Mr. Peduto accused Mr. Ravenstahl of being misleading about the matter.

He said he has talked to nonprofits about contributing $20 million to a
pension bailout plan. However, he has announced no commitments and said
he never intended for the contributions to be used for general operating
expenses anyway.

Last week, Mr. Peduto sent the ICA a letter calling the $20 million
"phantom revenues" and urging ICA to reject the budget and five-year
plan. (Nov. 15, 2010)

At a brief meeting Wednesday, ICA unanimously approved a $451 million
budget and five-year plan that did away with the $20 million... (Dec. 9, 2010)

The budget lists about $3.2 million in revenue from nonprofits this
year, but the city's agreement with the Pittsburgh Public Service Fund
-- a coalition of nonprofit groups that has made payments in lieu of
taxes to the city in some years -- expired Dec. 31.

"At this time, there have been no formal discussions regarding a new
agreement," G. Reynolds Clark, a fund representative and University of
Pittsburgh vice chancellor, said in an email relayed through the
university's media relations office. (Jan. 16, 2012)

Overseers and Mr. Ravenstahl's aides met Friday to work through their
differences. The same day, Mr. Ravenstahl sent authority Chairwoman
Barbara McNees a letter noting that legislation to establish the trust
fund had been introduced in council Jan. 17 and that efforts to secure
nonprofit contributions were under way. (Jan. 25, 2012)

This year, the city anticipates about $2.6 million from the fund, a
consortium of nonprofits that identifies its members but doesn't say how
much each contributes. (Today)

Monday, October 15, 2012

Do you think the Intergovernmental Cooperation Authority (ticka ticka... ZOOMP!) is just an opaque and unelected cabal of political appointees beholden to Harrisburg legislative caucus leaders, run by a battered and bruised bonds trading journeyman earning $120,000 a year for part-time consulting?

Well, your understanding couldn't be more partial! The ICA are hometown nuns and union laborers who volunteer because they share a love for this City and are working hard to put it back on its feet!

The second thing we share is our support of the recent findings of the
Act 47 team and its recommendation to terminate the city's status as a
financially distressed municipality -- while keeping the
Intergovernmental Cooperation Authority in existence. (P-G, Geibel & Stanizzo)

The first question to ask is, who is the audience for this op-ed? Who exactly is it important to convince of this? Public officials? Financial markets? The newspaper itself?

So far, there has been no move to dismantle the five-member Intergovernmental Cooperation Authority.

One wonders whether there is anything buried deep down in the enabling legislation underpinning the ICA which the end of Act 47 can "trigger" in terms of its own sunset.

“I’ve always said I think this administration can use all the oversight
that it can get, and I still feel that way,” said Lamb, a likely
candidate for mayor next year. (Trib, Bob Bauder)

Editorial comment: I hear that -- I really do -- and bonus points for quotable zing. But it's just no valid argument in terms of whether or not to disband oversight. If democratic self-government is good enough for Egyptians, it's good enough for Pittsburghers -- and although it might be better in terms of bean-counting to remain impervious to some collective bargaining pressures until we manage to elect a True Savior, it's not terribly fair with respect to those collective bargaining units and their constitutional rights.

Of course, as 2/5 of the ICA point out above, we are still behind the eight-ball in terms of the very pension and debt burdens which caused the City put out a "distress" call in 2003 in the first place. So I'm not in any great rush to quit that until we have substantially resolved those conundrums.

But last week's display left us with at least two interesting bits of intelligence:

1. The Act 47 Coordinators are really the junior partners when it comes to oversight. The last time they were in the news at all was the summer of 2009, when significant portions of their 5-year recovery plan were re-written by an historically rebellious Pittsburgh City Council. It almost seems as though the Coordinators lost their mojo after they threatened hardball and sanctions, yet ultimately accepted a deal.

Meanwhile, it is still an annual spectacle getting the City's budget approved by the ICA. They are even known to step in to override day-to-day matters.

Considering the timing, it's almost as though somebody or somebodies in Harrisburg wished to provide Mayor Ravenstahl with the presumed massive political triumph of vanquishing "Act 47 Distressed Status" -- while still keeping the City fundamentally down under strict oversight. Who ever said the Mayor doesn't enjoy good relationships with leaders in Harrisburg?

2. Let's return to what the two board members of the ICA wrote. Aside from pension obligations, which has conventionally been considered the paramount impossibility:

The second obstacle is overall debt. While the debt level has been
moving in the right direction, the city issued $80 million of new debt
this year and has plans to issue more in 2015, 2018 and 2021. This will
make it hard to reduce overall debt to an acceptable level. (P-G, Geibel & Stanizzo)

Really? Plans for more new debt in 2015, 2018 and 2021? The one loan was one thing, but it would be uncharacteristic for this administration to backslide into such a credit-card mentality.

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